So basically we need to keep mortgage rates artifically low at the taxpayers expense.

unwatchable obfuscation. He set up FNM and FRE to have the problem they now have.

I mean, look at the reality.

The charter was implied govt backing. If it was basically actual and not just implied, why not make it explicit. And if it was not true, which we now know to be false, why not say it is false. Why is it that this ambiguity was allowed to persist for so long when the cost of that ambiguity would be so high?

So, first he lets the ambiguity continue. Then, knowing full well how he already felt about the matter (that a bailout would happen if needed, meaning he knew the implicit backing was more) he goes on to push these two goliaths (which are too big, so he says)into gettting bigger. And NOW he tells us the size is the problem? This is just horse manure.

He knew they were thinly capitalized, and he knew that prices were falling. But he allowed them to resist capital raising measures when he knew the implied backing was a guarantee?

I mean, hello people, wake up~ Youve been had from day 1 with this tool. All he has ever been about is bailing out his buddies through the taxpayers largesse, that they would never have acceded to. Disgustin!

OH MY!!! Lokk what the taxpayers inherited

Fed Deemed Fannie, Freddie Capital Low, Fisher Says

Fed Deemed Fannie, Freddie Capital Low, Fisher Says (Update1) - Bloomberg.com
Federal Reserve examiners deemed Fannie Mae and Freddie Mac's capital reserves too low prior to the U.S. Treasury Department's takeover of the mortgage finance companies, Dallas Fed President Richard Fisher said.

We concluded that the capital of these institutions was too low relative to their exposure,'' Fisher said in response to an audience question after a speech in Austin, Texas. Further,that capital in and of itself was of low quality.''

SR,

Blink rate and accessing cues suggest something other than the unvarnished truth...

I'm getting so sick of see Daddy Warbucks and listening to his BS. January can't get there soon enough.

Just remember that the worst abuses in the markets had their origins in the mid 90s.

This was when Robert Shiller first made his plea to government officials that we were headed down the same path as in the 1920s.

He was ignored.

I am marking my calendar. I suspect we will see within about 4 months the "good bank-bad bank" separation. Parts of these operations will be spun off with clean balance sheets, to write only new loans. I am unsure if they will have explicit federal guarantees. However, I expect the new entities will operate for a year or two and then be privatized.

I think they will return as private companies. My guess is they'll soon be known as Fannie Mao and Freddie Xiac.

China's gunna own yo' doubley-wide.

"A lot of people have been doing work on this for a long time." (paraphrasing)

At this point, an ACTUAL reporter would have asked: "Were they already working on it when you told Congress this was highly unlikely to ever be necessary? How do you explain that?"

Democracy is a form of government that cannot long survive, for as soon as the people learn that they have a voice in the fiscal policies of the government, they will move to vote for themselves all the money in the treasury, and bankrupt the nation.

Hahah... well maybe that's an argument in favor of fiat currencies. They can vote themselves all the money in the treasury, only to find it worthless.

That'll teach them.

Paulson: "There is no analysis [about how much this will cost taxpayers.] We didn't sit there with a calculator and figure this out."

Uhh...he says this as reassurance? Is it a good thing that they have no idea of what this might cost us in a worst case scenario?

There's no forethought being applied here.

Hence the endless series of disasters.

The US should outlaw retarded presidents appointing numbskull appointees from investment banks.

The GSEs haven't been operating in a vacuum. First, they were privatized (for what reason? - they had been stable and were earning money).

Then the Investment Banks were let loose in the markets (Thank you ex-Sen. Phil Graham (PhD) for your several hundred page late-at-night modification of the laws on the firewall between IB and Commercial Banks as Chair of Senate Finance (with no debate!). Yes, the same Sen. Graham that was an advisor to McCain (and said to the the next Treas. Sec.) before he called the US citizens whiners - and is now back on McCain's 'informal' team).

Then the hedgies, IB's and CB's multi-layered the mortgage debt through leverage obtained by various forms of asset backed (LOL) securities that noone understood. Why was this allowed?

I won't complete this litany, but this isn't just a GSE failure, it is a failure of the financial system due to greed by big financial players of several flavors. Can we spell lobbyists and insiders - give and you shall receive?

Maybe re-privatizing the GSEs someday is a solution, but I don't see that as an article of fact, but one of faith. Faith-based policy making is the hallmark of the 'market always solves the problem' crowd (with the accompanying faith that less regulation is always better). With appropriate 'banker's caution' there is nothing inherently wrong with the Fed. gov't backing mortgages as long as the private players who initiate the loans are regulated within an inch of their life and made to pay for their mistakes.

Paulson was choosing his words carefully, but the intent to deceive was patent. Count how many times he was blinking fast and looking upwards and you tell when the lies weren't rehearsed enough.

Note he gave no justification for making the Treasury 'contribution' (ack!) junior to all the GSE debt(bonds). There was no analysis of how much this could cost if the bad/worst case occured? Bullshit!SELLOUT!

The only topic we should be discussing is how to stop this series of events from happening.

Well, a good place to start is not reelecting the lying bastards that since 2001 have controlled the executive branch of the government and not pretending that McCain - who backed BushCo every time he could, particularly when he wanted the 2008 nomination represents 'change'. Change of a few faces, maybe. Change in direction: not on our lives.

Want more of the same? Elect McCain/Palin and you get reformulated Bush/Cheney - but its still the same conservative faith-based policy.

cnn money is reporting a low 2.1% increase in consumer borrowing as bad news for the economy. More would be better?

Business, financial, personal finance news - CNNMoney.com

Looking at that creep just made me vomit in my mouth.....a little. If I would have had the sound on....it would have been a full fledge deluge of entrails and partilally digested B.S. that these clowns have been shoving down my throat for almost a year. When will this prison term end.....? The end can't get here fast enough!

we have so long until FDIC Friday, I sure hope we get some more hints on who is going to fail next!

They steal from the taxpayer to reduce mortgage rates to prop up an inflated asset to be purchased by the taxpayer.

No ponzi scheme here...move along.

--
Born-and-bred dopes like to be ruled over by manipulative Crooks. Sensible people thru most of history have liked to be ruled by kings.

Israelites were not happy with 'democracy' with division of labor among tribes and they demanded that God give them a king. The golden age of the Israelites was under the kings. The best the Romans had was under the three emperors during Marcus Aurelius era.

History, biblical or otherwise, is immaterial to modern era dopes who have gained new knowledge about human institutions. All that new knowledge consists of brainwashing from birth. And it shows.

Born-and-bred American dopes have no idea how evil the banking and finance Crooks, BFNYC, really are and can be. They will find out the hard way. People are not told who were behind many of the modern wars and revolutions. We are dealing with evil. Bernanke, Greenspan, Paulson, etc. are faces of modern evil. Yeah, America's Crooks have a global empire and have spread their scams and schemes to most of the world.

Disaster led by financial collapse will engulf the whole world. The main culprits are BFNYC.

Jas

Nick writes:
I realize this is probably the contrarian opinion on CR, but I thought Paulson came off as much more "in-touch" with the real problems than most of the other people involved in the mess.

Yes, the GSE issues started decades ago however... Taking a superficial look at what has transpired just this past year a few questions come to mind that Hank should have considered:

If Hank knew that the shit was gonna hit the fan then why push F&F into getting bigger?
Why set them up to fail by forcing them to relax lending standards (Alt-A, ARMs, Jumbo Prime...)?
Why allow them to run what is essence were hedge funds using some of their riskier portfolios?
Why relax their capital cushion requirements in the face of rising risk?
Why not take them to task regarding their 'book' and demanding a real earnings report?

We didn't sit there and figure this out with a calculator.

We only used the calculator when figuring up our enormous bonuses we earned thanks to the flawed mathematics that created this mess.

Everybody, check this out:

Fannie, Freddie Get Tax Pass, Too - Tax - CFO.com

Wouldn't it be nice if the Internal Revenue Service issued a new tax rule that applied just to your company to help it retain all the net-operating losses it could? In that way, the NOLs could be used over the next 20 years to offset income, and reduce the company's tax bill.

If the Treasury Department were simply another company, such a takeover would constitute a change of control under the tax code. But the new ruling creates a big exception for the two mortgage lenders. And while the IRS ruling was issued without any basis in law, says Willens, the NOL provision of the bailout was done "very effectively." He explains that the new rule eliminates the "testing dates" that normally would have applied to Fannie and Freddie, or any other company, in the event of a takeover.

Etc.

From a new interview with economist Michael Hudson:

"It is pure hypocrisy for Wall Street’s Hank Paulson to claim that all this is being done to 'help home owners.' They are vehicles off whom to make money, not the beneficiaries. They are at the bottom of an increasingly carnivorous and extractive financial food chain."

Mike Whitney: An Interview with Michael Hudson on the Worsening Debt Crisis